TCS hits new high ahead of Q2 earnings

TCS has surged nearly 5% in two trading sessions after Infosys reported a healthy set of results for Q2FY2014.

Tata Consultancy Services (TCS) has surged 3% at Rs 2,180, its new high on BSE, ahead of July-September (Q2) quarter earnings tomorrow.

Shares of India’s largest software services provider has rallied nearly 5% in past two trading sessions after its peer Infosys reported a healthy set of results for Q2FY2014 with dollar revenues coming in significantly ahead of estimates. Its US dollar (USD) revenues grew strongly by 3.8% quarter-on-quarter (QoQ) against an analyst estimate of around 2.2%. Infosys has also revised its USD revenue growth guidance for FY2014 to 9-10% from 6-10% given earlier.

Meanwhile, most of the analyst expects TCS to post best revenue growth amongst peers at 5.8% quarter-on-quarter in dollar terms.

We expect highest EBITDA margin expansion for TCS of over 300 bps QoQ due to tailwind of Rupee depreciation and absence of wage hike which will offset impact of promotions in Q2, says analyst at IDBI Capital.

Analyst estimate 5% US$ revenue growth aided by full quarter consolidation of ALTI and expect unfavorable cross currency movement to impact US$ revenue growth by 117bps.